New rallying cry on Wall Street: Let's make a deal

Darden Restaurants has sold its Red Lobster chain to an investment firm for $2.1 billion in cash. (Photo: AP)

Wall Street deal-makers were at it again Friday, with Darden Restaurants selling its Red Lobster chain and pharmaceutical company Abbott buying a Chile-based drug company.

Let’s make a deal is the new rallying cry on Wall Street. With cash plentiful in corporate coffers, U.S. markets relatively strong, and companies looking for growth through strategic acquisitions, CEOs have embraced M&A.

Darden Restaurants said early Friday that it entered into an agreement to sell Red Lobster to Golden Gate Capital for $2.1 billion in cash.

Darden shares were down 3.2% in early trading.

The company which operates 2,100 restaurants under a handful of brand names, including Olive Garden and LongHorn Steakhouse, says it will use $1 billion of the proceeds of the sale to pay down debt and use $500 million to $600 million to fund a share repurchase program. It also said it would maintain its cash dividend.

Clarence Otis, Darden’s chairman and CEO, said, “Over the past months, we have had extensive conversations with our shareholders about Darden and the company’s strategic direction. By enabling us to bolster the company’s financial foundation and increase our focus on the Olive Garden brand renaissance program, we believe this agreement addresses key issues that our shareholders have raised, including the need to preserve the Company’s dividend and regain momentum at Olive Garden.”

“Red Lobster is an exceptionally strong brand with an unparalleled market position in seafood casual dining,” said Josh Olshansky, Managing Director at Golden Gate Capital. “Red Lobster is exactly the type of company in which we seek to invest given its great brand profile and strong management team.”

On the pharmaceutical front, Abbott announced that it was doubling its presence in the fast-growing Latin America market and bolstering its generic drug portfolio by acquiring Chile-based CFR Pharmaceuticals.

Assuming all publicly-held shares are tendered, the total purchase price would be approximately $2.9 billion, plus the assumption of net debt of approximately $430 million, Abbott said in a press release.

This deal immediately establishes Abbott among the top 10 pharmaceutical companies in Latin America, further broadening its geographic presence across the region, the company said.

CFR Pharmaceuticals operates in 15 Latin American markets and has a product portfolio that is well aligned with Abbott’s current pharmaceutical therapeutic areas of focus in women’s health, central nervous system, cardiovascular and respiratory diseases.

“With its scale and leadership positions in the region, strong commercial and development organizations, well-respected leadership team and a trusted portfolio of recognized brands, CFR is one of the leading branded generic companies in Latin America,” said Miles White, chairman and chief executive officer, Abbott. “This acquisition will significantly enhance and broaden Abbott’s Latin American footprint, and is well aligned with our long-term strategy and commitment to fast-growing markets.”

Abbott expects the acquisition to add approximately $900 million to its sales in the first full year (2015), with expected double-digit sales growth over the next several years.